The Social Liberal Forum’s Gareth Epps responded to yesterday’s budget over on the SLF website:
Much of this year’s Budget comes as little surprise. With a tight fiscal background and given George Osborne’s penchant for playing to the gallery, so much is predictable. Ditto the widely-trailed coalition announcements on the income tax threshold (where Nick Clegg has been desperate to stop the Tories claiming credit for the policy they opposed in 2010) and childcare.
But where – again – are the unequivocally Liberal policies? Extending childcare for those in receipt of Universal Credit is absolutely the right thing to do: but when money is so tight, why the perk for the very wealthy who can afford it – and why not reforms to address the shortage of supply that would create jobs as well as helping those who need it most?
In coalition we have learned, however uncomfortably, to accommodate Tory posturing that is not progressive, damaging, or simply wrong. Again we have evidence: a dogmatic and damaging freeze on welfare, and an extension of the ISA savings limit that is mercifully the extent of the sops to the wealthy. Posturing, too, on a beer duty freeze that will give nothing to the consumer nor to the publican, but will simply be swallowed up by the big breweries and Osborne’s mates in the pubcos.
The clearest sense of Lib Dem priorities, though, came with the obvious influence of Steve Webb, who’s work at DWP has reformed pensions; it was striking that this was where many of the surprises were. The party will need to get behind this and claim it as the Lib Dem success it is. Much the same goes for Vince Cable successfully securing a much higher tax-free investment allowance of £500,000 for businesses – we have to show voters this is our win.
As for the rest,it is same old, same old. Resting on laurels on employment; little to tackle low pay in a meaningful way; and nothing of the promised incentives for housebuilding. The opportunities for Liberal Democrats to set out our priorities couldn’t be clearer.
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13 Comments
Putting ideological differences aside, I am worried about the new consensus that seems to say that tax reliefs for investment is good, especially if it is manufacturing. Only depreciation, not whole asset purchases, should be deductible against corporation tax and I am worried these things aren’t going to pay for themselves. We might have to go along with this consensus for stability reasons for a while, but I recommend we start to act as a break on any further reliefs.
I was delighted to hear Osborne talk about the effect of monetary policy on pensioner incomes, with the camera zooming in on Steve Webb too, but I feel the pensioner bonds solution only gets 50% marks. My worry is specifically regarding pensions who have bought fixed income lifetime annuities, who will see their incomes eroded if we have a massive influx in inflation. This problem hasn’t materialised yet, but I can’t help thinking it is just around the corner and we should “fixed the roof when the sun is shining” on this one too. The Monetary Policy Committee need to be lobbied on it. However Mark Carney is making the right noises.
“But where – again – are the unequivocally Liberal policies?”
Odd comment given that one of key points in the election is going to be that taking the low paid out of tax is down to us Lib Dems. Do the SLF not regard this an unequivocal Liberal policy ?
I think many LDs could feel uneasy about the huge pension and ISA changes (as well as the investment allowance). Not because they’re bad policies but because we’re not clear what the thinking is behind them, or where they will lead. I tend to trust Steve Webb to get things right, but if it’s something that’s just come from his head rather than substantial discussion within the broader party, it’s harder for members to understand, support and campaign on the back of. Already there are suggestions that giving access to pension pots will open up new options in social care funding or other public services, or even greater liberalisation of pension saving, but it’s not clear whether LDs would be able to provide direction or instead be spectators to such changes.
For example, what is our party’s position on taxing bank/ISA/pension savings, given the balance between reducing inequality (fairer society?) and encouraging saving and investment (stronger economy?)?
Similarly, Steve Webb seems very keen on a simple and generous state pension that is the foundation of increased freedom for other savings, and the party has got behind the triple lock to give more to all pensioners. But that seems quite at odds with our position on Winter Fuel Payments.
And on the annual investment allowance (which we cut, then increased, then increased again for a few years), is that intended to be a temporary boost to particular sectors of the economy, or a position on how the corporation tax system should work in the long term?
Policy is always going to get blown about by the political needs of the day, but there’s a definite need for some fundamental thinking on the above issues if we’re to craft a believable, implementable and worthwhile set of policies on building both a stronger economy and fairer society.
Simon McGrath
I do not speak for the SLF (I am not even a member) but I will answer your question . Of course, varying a minor element of income tax is NOT an unequivocal Liberal policy.
Income taxes, and close equivalents, are used all over the world by governments that are anything but Liberal.
Change to income tax regimes occur for various reasons, sometimes in the hope of gaining political advantage. They are not specifically Liberal or for that matter illiberal. To suggest that they are “unequivocally Liberal”, as you do in your question, seems to demonstrate a weak grasp on Liberalism.
By concentrating attention on income tax rather than on alleviating poverty, and worse by pretending that “everyone is getting a tax cut” is not only wrong but misleading.
John Tilley as always puts things very well.
There is some further analysis to be done on the pension reforms, some of which clearly come from the Tory half of the coalition. The ISA extension I highlighted earlier as being flawed and regressive, though as Adam Corlett highlights (and his excellent CentreForum pamphlet is worth a read) we have no particular view; our tax policy paper essentially argued for the status quo.
There is a worrying trend towards a quite naked populism (see the Tory imagery around bingo, beer and – the key bit – ‘them’) that ignores the environment (carbon price floor), housing and creating opportunities for the lowest earners who get under £10,000. A neo-conservative, even smaller state solution involving endless tax cuts funded through eye-watering spending cuts affecting the most vulnerable certainly isn’t a Liberal solution (to refer to one of the comments above). The beer duty decrease will not even be passed on by the pubcos to publicans or consumers.
Liberals, by contrast, should be making clear what we would do. What were the missing parts of this Budget that are really Liberal? That would actually inspire people and encourage them to join us and campaign for us.
The big point about this budget is being ignored. Austerity in public spending will remain for many years to come. It’s one reason why it’s not good enough to say 3 years of flatlining doesn’t really matter because the economy is now growing. That loss of output is permenant. A return to growth doesn’t change that. Government spendng as a share of GDP will fall to about 38% by 2020, lower than under Thatcher. You have to wonder how the public services we expect to be delivered will cope. I think the LD leadership has become blind to this. David Nicholson is already raising the alarm with the health service and that’s been fairly well sheltered from cuts. We have a welfare ‘cap’ that will only rise with inflation, presumably to stop out of control government spending. But why cap welfare spending and not health, education, defence etc? Are we saying welfare is less worthy as public spending? I’m fed up with the welfare state being treated as some kind of embarrassing relative you prefer not to mention but you unfortunately have to tolerate. For all the talk about scroungers, would we prefer a to live in a country where there was little or no safety net. If not we should be proud of the welfare state. We all know welfare spending goes up in an economic downturn and down in a recovery. So surely flexibility is key?
More than that what are the politics here? It all feels a bit phoney. The coalition seizes to exist in May next year and yet we have coalition spending plans going many years ahead. What will be the Lib Dems tax and spend policies at the next election? Surely not the same as the Tory dominated coalition’s?
Frank – look under the original piece on the SLF website and you will see I wrote a piece on aspects of that: http://socialliberal.net/2014/03/04/how-to-fix-the-structural-deficit-the-fair-way/
The key question for me, yet again, is what our leaders will say about it. This budget is not a Liberal Democrat budget, but a coalition budget which does not do enough to deal with inequality. Will Nick Clegg say precisely that ?
If he does not, then I shall once again feel unenthusiastic about taking part in the next election campaign, like many other within the party. Locally people are still leaving us because of our inability to make it clear that we oppose policies which do not give enough attention to inequality.
CLlr. Nigel Jones
Nigel Jones asks
Will Nick Clegg say precisely that ?
Well Nigel all the evidence is that he will not. Indeed I am not confident that Nick Clegg could go through the budget with you page by page and identify what is a Liberal element and what is not.
The pretence which is being hyped at the moment that Clegg and Alexander fight tooth and nai over every last dot and comma is complete tosh.
“But where – again – are the unequivocally Liberal policies?
It seems to me there are two main elements to this. The first is the talent for political manoeuvring to achieve desired ends displayed by the various party leaders. Thatcher and Blair had such talent in spades. Cameron is not up to the Thatcher/Blair level but is considerably better than Clegg who therefore tends to be outmanoeuvred.
Perhaps the best example of this is the raised income tax threshold opposed before the election by the Tories. When circumstances dictated a policy reversal in this they quickly flipped, taking credit for their help for “hard-working families” to burnish their image, confusing the average voter about what the Lib Dems are actually for (as distinct from the Tories themselves) and feeding into their other narrative of blaming the victims of their policies (e.g. the unemployed) while plotting to make up the “loss” (as they might see it) by other methods such as the spare bedroom tax. The speed with which Tory spokesmen at all levels switched to this new narrative after the election was quite remarkable. I don’t think the Lib Dems could match them for nimbleness. Hence Clegg & Co were left to gather a crowd of supporters and a big banner to make their point as if to say, “Look at us. Please, please look at us. Pleeeese!” It’s so amateur.
The second, and ultimately far more important aspect in my view is the thinking deficit in Lib Dem circles. As Keynes put it, ” … the ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist.” Since the Lib/SDP merger the Party leadership has been firmly anti-intellectual. The lowest common denominator (“fairness”) is the best they have been able to come up with so that, per Keynes’ warning, they are to a remarkable extent slaves to economic theory dreamed up by Tories to justify their greed-based plans even though those economic theories, when examined, turn out to be utter tosh, a veritable Frankenstein creation.
So what Lib Dems are left with is a bundle of policies with little in the way of deep coherence at a time when the need for a real alternative to Tories policies has never been greater. For example, we could have made the point over the heads of the Tories that a thriving economy must always be based on trust and then call them out for their bag-carrying for the City where “muppet -slaying” (muppets = customers) is the order of the day. An so on, almost ad infinitum. People would get that and the Tories would have to bend. But no, our esteemed leaders want to stay firmly within the tramlines of existing (Tory) thought and view the City and it’s speculative profits for the few as somehow a good thing.
GF, the coalition brings in a pension reform which wipes £3bn off the value of (fat cat) annuity providers, to the benefit of ordinary pensioners, and Labour equivocates, at best, on the issue. Who is the bag carrier for the City now?
Joe – a fair point. That is pretty much what I was trying to say but since it came more or less as a bolt from the blue how much will it rebound to Lib Dem advantage come the next election? Too little I fear because there just wasn’t enough prior identification with that policy thrust when there could have been and I think the Party would have been delighted with it. Ditto the Country. I believe that getting the thrust/direction of policy right is far more important than the minutiae of specific policies, politically-speaking and that depends on having a clear understanding of what matters just as Keynes said.
I agree very much that the budget was unimpressive to someone with social inequality in their hearts and minds. The help with child care seems to be going to people who do not need it. To give retiring people access to their ‘pension pot’ may please people who want that freedom, but, if they blow it, who will look after them later when they have no income? And the failure to get the social housing activity going is tragic.
Paul King.